Hadley (pictured) said the policy didn't make sense, as Mr Latham is a candidate for the NSW parliament and can not influence federal matters such as welfare

'It's just a populist-type decision. I do have a number of concerns about the fact that he said you've got to prove that you're 25 per cent indigenous which means you've got to have grandparents who are full-blooded Aboriginal people,' he told The Today Show.

'There would be people that have grandfathers, great-grandfathers, great-grandmothers and great-great-grandmothers who claim they are indigenous and so they should be able to be, I mean it's part of their heritage.'

Hadley said he believes there is a problem with people claiming Centrelink benefits they weren't entitled to, but disagreed with Mr Latham's DNA benchmark of 25 per cent indigenous ancestry to qualify.

'To actually quantify it with 25 per cent - what, so your great-grandfather and great-grandmother are indigenous but under Mark Latham's scheme you can't claim aboriginality?' Hadley said.

RELATED ARTICLES

Share this article

'Mark Latham can't do anything about it in the state parliament, it's a federal matter. It's simply a populist thing to try and gain attention.'

Mr Latham disputed Hadley's claim welfare fraud is a federal issue.

'No, there's a whole host of New South Wales indigenous welfare programs, positions reserved for Aboriginal people, the Land Council system where you need to qualify... the Land Councils in New South Wales have got assets of $5billion,' he said.

'There's a huge amount of state money that goes into this area and what I'm saying is if the technology exists, the DNA ancestry testing, let's use it.

Australians claiming to be Aboriginal would be forced to undergo DNA testing under a One Nation policy designed to stamp out welfare fraud (pictured is One Nation leader Pauline Hanson, left, with the party's New South Wales leader Mark Latham)

'We should be respecting genuine indigenous identity and getting the money to the people in need who have got the genuine Aboriginal background.'

Mr Latham said Australians are upset with seeing people who did not appear to be indigenous claim to be Aboriginal.

'Australians are sick and tired of seeing people with blonde hair and blue eyes declaring themselves to be indigenous, when clearly they have no recognisable Aboriginal background and are doing it solely to qualify for extra money.'

In Australia, people can identify as indigenous to be given special treatment when applying for jobs in the public service or the ABC, as part of an affirmative action policy designed to promote one minority group.

They also qualify for special benefits, including Abstudy to fund university study or an apprenticeship, and can join an Aboriginal land council.

'The system of indigenous self-identification, declaring Aboriginality without any bloodline or DNA proof, has been open to widespread abuse,' Mr Latham said.

'It is being used as a fraudulent way of cashing in on welfare benefits, special Aboriginal programs and land council largesse.'

Mr Latham said genuine indigenous Australians continue to live in poverty as people with little or no indigenous heritage claim taxpayer-funded benefits.

'Any waste of taxpayer funds in this area is highly disrespectful to genuine indigenous,' he said.

'It weakens the integrity of their racial group and takes money away from people in genuine need.

'We believe in an honest and fair welfare system.

'First Australians deserve the respect of stopping rorters and opportunists from masquerading as indigenous.'

While indigenous recognition is largely a federal issue, the NSW public service has an Aboriginal employment strategy and administers indigenous land councils.

Mr Latham has proposed a law which would require Aboriginality to be determined by a DNA test showing someone has at least one full-blood Aboriginal grandparent (pictured as Aboriginal men at Alice Springs in central Australia)

The Greens' spokeswoman on Aboriginal and Torres Strait Islander issues Senator Rachel Siewert described the One Nation policy as 'blatant racism'.

'It should be called out as such,' she told Daily Mail Australia on Monday.

'But it's what you can expect from One Nation who are using shock tactics to get attention.'

As federal Labor leader in 2004, Mr Latham backed then Prime Minister John Howard's dismantling of the Aboriginal and Torres Strait Islander Commission.

Almost 15 years later, as One Nation's leader upper house candidate in the NSW election, he has savaged his former party for failing to tackle fraudulent claims of being Aboriginal.

'It's surprising that Labor and The Greens, who pretend to respect Aboriginality, have not introduced this policy already,' Mr Latham said.

Indigenous people were not counted in the Census until a 1967 referendum passed with 90.77 per cent support.

A few years later during the early 1970s, Gough Whitlam's Labor government introduced a policy of indigenous self-determination.

Indigenous land rights activist Noel Pearson has criticised the prevailing system of 'passive welfare' which originated under Mr Whitlam, who Mr Latham worked for as a former prime minister during the 1980s.